Retentions are the part of construction finance that looks like a minor administrative detail and behaves like a slow leak. A few percent held back on each job doesn’t feel like much. Across a busy year, it can quietly become the largest asset on your balance sheet that you cannot actually spend.
What retention really is
A retention is money you’ve earned but the client is holding — typically until practical completion, and then a further chunk until the end of the defects period. On paper it’s a debtor. In your bank account it’s nothing. That gap between “earned” and “available” is where profitable contractors get into cash trouble.
Where it distorts the picture
Your profit looks real before your cash is. You can report a strong year and still be unable to pay next month’s subcontractors, because a meaningful slice of that profit is sitting as retention you won’t see for eighteen months.
It ages badly. Final retention releases are the invoices most likely to be forgotten, disputed, or quietly written off. Money you were sure you’d get has a habit of evaporating if nobody chases it.
What to actually do
Track retentions as their own line, not buried in trade debtors. Put release dates in a diary and chase them like any other overdue invoice — because that’s what they are. And when you’re pricing work, treat retained cash as having a real cost: it’s your money, funding someone else’s project, for free.
None of this is complicated. But the contractors who treat retentions as an afterthought are the ones who end up borrowing to cover a gap they created themselves.
Who's writing
I'm a senior manager at a UK accountancy firm, with a particular interest in construction and inheritance tax — and, off the clock, a parent of three under three. Carried Forward is where I write about money, work, and the decisions that shape both, in plain English and without the jargon.